The Doha Development Round of trade negotiations: understanding the issues

More open markets have brought economic benefits to a broad range of countries over the years, including many in the developing world. While the multilateral trade negotiations launched in 2001, known as the Doha Development Agenda, have momentarily stalled, it is important to keep sight of the benefits of further opening up markets in agriculture, industrial and consumer goods, and services. Who stands to gain from more open markets and less government support in agriculture? How can developing countries make the most of new trading opportunities? What would be the result of substantial market opening in services? OECD data and analysis provides answers to some of these questions.

Doha: the low hanging fruit
by Angel Gurría, Secretary-General of the OECD
21 August 2006
Mr. Gurría presents his views about why the Doha talks collapsed in July, what their failure means, and how to move forward with the Doha Development Agenda.

Agriculture contributes about 2% to the Gross Domestic Product of the 30 OECD countries. Farmers in these 30 countries receive support in various ways equivalent to 1.1% of their GDP.

Support to farmers in OECD countries totals 280 billion USD annually. By contrast, official development assistance from OECD countries to developing countries amounted to 80 billion USD in 2004. Bilateral development assistance from OECD countries to farmers in developing countries amounted to 3 billion USD in 2001.

OECD countries dominate world trade in agriculture - with over 70% of exports and 75% of imports; least developed countries account for only about 1% of world agricultural imports and exports.

Food prices measured at the farm gate in OECD countries are 30% higher than in international trade.

Public support for farmers in OECD countries costs a family of four on average nearly 1,000 USD per year in higher prices and taxes.

More than 70% of farm support in OECD countries is provided in the form of trade distorting market price support and payments linked to production, all of which are inefficient in terms of bolstering farm incomes: Of every $1 in price support, only $0.25 ends up in the farmer’s pocket as extra income. The rest is absorbed by higher land prices, fertiliser and feed costs and other factors.

In most OECD countries, farm households have higher-than-average incomes.

The biggest and richest 25% of farmers receive 90% of all support provided in the U.S. and 70% in the EU. Tens of thousands of small farm households benefit little from current farm policies.

Nearly all OECD countries apply tariffs on certain agricultural imports that exceed the value of the product.

Brazil provides less support to its farmers than any OECD country except New Zealand. China gives only slightly more, exceeding only New Zealand and Australia among OECD countries.

About 75% of the world's poor live in rural areas, and many are dependent on agriculture.

Cutting all agricultural tariffs and subsidies by 50% would set off a chain reaction in realignments of production and consumption patterns across economies that OECD analysts estimate would add an extra 26 billion USD to annual world income, equivalent to just over four dollars a year for every person on the globe.

Development

Will developing countries really gain substantially from more market opening? Studies suggest the answer is yes, but the gains could be spread unevenly between countries. And even if the potential gains are there, are developing countries equipped to make the most of their new trading chances?

Services, from health to banking, have become the single largest sector in many economies, providing the bulk of employment and income. So an efficient services sector is crucial for the whole economy. But opening up services is proving a complex challenge.

Trade barriers can be hazardous to the environment, at least those that prevent the free flow of environmental goods and services. Eliminating these barriers is key to improving environmental protection but even defining environmental goods and services is proving difficult.